Intro
As predicted in our last report, the kiwi’s interest rate was cut by 25 basis points, with the New Zealand dollar reacting accordingly on the charts. It was the weakest major currency last week, followed by its closest neighbour, the Aussie.
There are no high-impact economic events to note this week, but always leave room for surprises. Otherwise, my sentiment ratings haven’t changed from the last report, though check the fine print to get a true fundamental picture for this week.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
Powell’s Jackson Hole remarks nudged odds of a September Fed cut higher, and the July data mix keeps that door open: headline CPI 2.7% y/y, core ~3.1%, payrolls up a soft +73k with jobless at 4.2%.
The Fed held in July at 4.50%, and minutes show most members favoured waiting. So, a growth-sensitive, data-dependent pivot is the base case.
Key news to watch: Initial Jobless Claims on Thursday.
Euro (EUR): Bullish
The European Central Bank has stated that inflation is broadly consistent with its target, while wage pressures are easing. Policy can stay steady unless growth sours. Relative policy still looks less dovish than the Fed near term, offering a mild policy-rate support on dips even if growth is only grinding.
British Pound (GBP): Neutral
The Bank of England cut the interest rate by 25 bps to 4.00% recently in a razor-thin 5–4 vote. This is, of course, an easing step, but one that still acknowledges sticky service inflation and firm wages. Hiring has softened, keeping the Bank cautious about the pace of any further cuts. Such a blend caps the topside yet underpins sterling on dips.
Japanese Yen (JPY): Neutral
The BoJ held at 0.5% in late July but upgraded its inflation view and kept the option of resuming hikes alive. Tokyo core inflation and national gauges remain above 2%, and market odds of a 2025 hike are building.
If the Fed cuts while the BoJ edges forward, yield differentials compress, which supports a gradual yen recovery from weak levels.
Australian dollar (AUD): Neutral
The Reserve Bank of Australia cut the interest rate to 3.60% last week and downgraded the growth/productivity outlook. While lobs rebounded slightly in July (from 4.3% to 4.2%), China-sensitive commodity demand still argues for a shallow easing cycle. AUD rallies look tactical unless global growth or metals re-accelerate.
New Zealand dollar (NZD): Bearish
The RBNZ cut 25 bps to 3.00% last week and indicated that more easing is likely as Q2 CPI sits at 2.7% y/y and unemployment rose to 5.2%. With domestic momentum soft and the policy path tilting lower, NZD has a modest downside bias unless global risk sentiment improves.
Canadian dollar (CAD): Neutral
The BoC held the interest rate at 2.75% on Jul 30. July jobs then fell ~40.8k, nudging up odds of a September trim. Oil has no big tailwind, with official projections now seeing Brent sub-$60 in Q4. So, CAD is likely to track the USD and data pulse rather than stage an independent run.
Key news to watch: Inflation Rate YoY on Tuesday.
Swiss Franc (CHF): Bullish
Even after the SNB cut to 0% in June, safe-haven demand has kept CHF firm. Rising sight deposits revived talk of FX operations, but the risk of intervention mostly smooths out trend strength. With global risks still elevated and Switzerland’s inflation subdued, CHF retains a safe-haven premium.
